Healthcare Sector Review August 2018


Stock Performances: NYSE Arca Biotechnology (BTK, +18%) and NASDAQ Biotechnology (NBI, +7%) indices outperformed benchmark indices S&P 500 (SP50, +6%) and Russell 3000 (RUA, 5%) YTD 2018.


Public biotech financing experienced a weak year in 2017, however capital raised in 1H18 ($4.6B) has already exceeded the whole year 2017 ($4.2B) (Exhibit 5). Licensing deals remained flat with 218 deals in 1H18 compared to 216 deals in 1H17 (Exhibit 6). The number of M&A deals involving public biotech companies increased, whereas it declined in the private biotech world (+25%, -87%, respectively). The M&A deal volume remained flat throughout 2017-18 timeline following a strong year in 2016. In 2017, there was a decrease in the total number of M&A deals and financings relative to prior year. In contrast, 1H18 showed a strong rebound in financing activities (Exhibit 7).


Food and Drug Administration (FDA) approved 46 drugs in 2017 reaching a 22-year high. There have been 26 drug approvals in YTD-2018, including AGIO’s Tibsovo for treatment of acute myeloid leukemia (AML) and ARRY’s Mektovi and Braftovi for melanoma (Exhibit 12).


Recent news:
Mustang Bio inked a licensing agreement with St. Jude Children’s Research Hospital for the development of an ex vivo lentiviral gene therapy, that is currently in Phase 1/2 trial for infants under age of 2 with X-linked severe combined immunodeficiency disease. (August 13, 2018)

Alnylam received the first RNAi gene silencing therapeutic approval by The Food and Drug Administration (FDA) for treatment of hereditary transthyretin amyloidosis (hATTR), setting the pricing bar to $450,000. (August 10, 2018)

Gemphire Therapeutics Inc. (GEMP) shares plunged (-68%) on August 10 following termination of Phase 2 clinical trial on the use of gemcabene for the treatment of pediatric patients with non-alcoholic fatty liver disease (NAFLD). The failure was due to worsening clinical conditions of treated patients relative to the control group. (August 10, 2018)

Kyowa Hakko Kirin Co. Ltd.’s Poteligeo was approved for the treatment of cutaneous T-cell lymphoma (CTCL), becoming the sixth targeted therapy in the landscape. (August 08, 2018)

On the regulatory front: Recent FDA guidelines include:
Oncology Drugs and Biologics Guidance (August 2018):
Over sixty thousand clinical trials are conducted in oncology surpassing any other disease, breast cancer is the leading indication with 7,700 studies.
To minimize regulatory burden in early clinical development and to establish time and cost efficiency, FDA recommends the use of a single clinical protocol including multiple expansion cohorts with identified patient cohort-specific objectives.
Identify biomarkers by using in vitro diagnostic (IVD) assays was strongly recommended in early stages of clinical development.
Pediatric specific indications require additional protocol submission with detailed toxicity and pharmacokinetic (PK) assessments.

Biosimilar Action Plan (BAP, July 2018):
Since the first approval (Neupogen) in 2015, 12 biosimilars were approved by FDA; however only 4 (Zarxio, Inflectra, Renflexis, Fulphila) of them were launched. This shows challenges remain in the biosimilar industry.
European Medicines Agency (EMA) implemented automatic substitution for generic drugs resulting in a 70% price decline in small molecule drugs and a 66% decline in biologics. Twenty-two biosimilars were approved since 2006 by EMA.
The guidance anticipates statutory pathway to approval by implementing standardized reviews, creating resources and development tools, establishing physician education, and providing clarity and flexibility on interchangeable products. These efforts on clarity of scientific and regulatory pathway for biosimilars ease the regulatory burden to microcap biotechnology companies, such as Dyadic International, Inc. (DYAI), PFEnex Inc. (PFNX). DYAI employs C1 fungal expression technology for development of biologics, providing cost and time efficient production compared to CHO expression system. PFNX implements recombinant protein expression technology accelerating the production of biologics.

Guidance for Early Alzheimer’s Disease (February 2018):
Following almost 10 years without regulatory guidance or drug approvals, FDA and EMA published guidelines on treatment of early stage Alzheimer’s disease (AD).


The agency proposed the use of biomarkers to aid drug development process and implemented an accelerated approval program. Emerging biotech companies in the space such as Oryzon Genomics (ORY), Rodin Therapeutics (Private, targeting HDAC) could benefit from the recent developments. Both companies are developing novel epigenetic targeted therapies. ORY is currently assessing ORY2001 (LSD1/MAO-B inhibitor) in mild/moderate AD patients and Rodin’s HDAC inhibitor is at preclinical stage.

On the clinical front:
Neurological - Alzheimer’s Disease
Biogen (BIIB) and Eisai (TY0:4523 )’s Phase 2 data of BAN2401 (anti-amyloid antibody) for the treatment of early AD patients (856 patients, 18 months of follow-up) was presented at the Alzheimer’s Association International Conference (AAIC) in July 2018. Promising results in the high dose cohort were met with investors’ enthusiasm (BIIB stock initially climbed 20% on July 5). However, the shares declined 11% after the company presented oral data at AAIC on July 25, 2018. The share price decline was triggered by concerns related to:

  • Primary endpoint was not met by using the initially identified statistical model (Bayesian) and was changed to another model (ADCOMS)
  • Patients treated with lower doses of BAN2401 showed worse cognitive functions than the patients in the placebo arm

Despite the controversy, high dose (10mg/kg) demonstrated statistically significant improvement in cognitive function measured by ADAS-cog and ADCOMS models in 18 months. This result could catalyze renewed investors’ enthusiasm in AD arena.
Alzheimer’s anti-amyloid-β (Aβ) antibody (Ab) development has faced many late stage clinical failures in the last decade, BAN2401 data provides clinical support to amyloid hypothesis in AD. Abs differ based on their epitopes and recognition of Aβ confirmations (monomer, oligomer, protofibrils, fibrils), BAN2401 targeting protofibrils and aducanumab (an earlier stage compound by Biogen) targeting oligomer and fibril confirmations of Aβ. Emerging companies targeting Aβ include ProMIS (TSE:PMN) and Cognition Therapeutics (Private) targeting oligomer forms of β- amyloid, which is thought to be critical for the mechanism causing the disease. ProMIS’s lead compound PMN310 is at preclinical stage and anticipated to start Phase 1 study in 2H19.


BeiGene (BGNE) presented results from a clinical trial on the use of zanubrutinib (irreversible Bruton’s tyrosine kinase (BTK) inhibitor) for the treatment of Chronic lymphocytic leukemia (CLL) at European Hematology Association (EHA). CLL landscape is rapidly evolving. It is currently dominated by Abbvie (ABBV)’s ibrutinib (60% frontline use), however 50% of the patients develop resistance by acquiring mutation BTK-C481S. Thus, there is a need for second generation BTK inhibitors. Promising candidates medicines in development include:

  • Verastem (VSTM)’s PI3K inhibitor, which is under NDA submission (PDUFA on October)
  • ArQule Inc. (ARQL), Sunesis Pharmaceticals (SNSS) and Aptose Biosciences (APTO)’s reversible second generation BTK inhibitors, targeting refractory and resistance ibrutinib patients, are under development (data is expected at ASH 2018).

Whereas Bristol Myers (BMY) and Merck (MRK) continue to dominate the checkpoint inhibitor market, emerging biotechnology companies are developing next generation anti-cancer drugs. At present, thousands of clinical trials combine anti-PD1/PDL1 backbone therapy with various modalities; such as oncolytic viruses, vaccines, cell and gene therapies, tyrosine kinase inhibitors and chemotherapy. The abstracts presented at the 2018 American Society of Clinical Oncology (ASCO) meeting were also focused on these various modalities. At the forefront of clinical discussions, oncologists focused on lung cancer, which was the topic with the most abstracts at the conference.

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